Small cap of the day: A fantastic case of the “Mondays”
Today's Financial News - Posted June 1, 2009
It is not often that I get to write about a small-cap stock like this one. China Direct may be small, but may be a great opportunity for investors willing to take on some added risk. If you are as fearful of the fate of the greenback as I am, pay attention.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): I know it goes against ever American cultural belief, but one of my favorite days of the week is Monday. It is a day typically filled with merger and acquisition news, word of new political action from Washington and, especially these days, Mondays are prime time for bankruptcy filings.
With so much happening on the first day of the week, I often spend much of it perusing the movement throughout all sectors of the equities market.
Today, while most analysts were catching up on a job they should have done months ago (figuring out what is next for the auto industry), I was investigating the world of high-flying small caps.
As the chief strategist of an options-trading service, the world’s smallest publicly traded companies are typically out of reach. Even if they have options readily available, low levels of liquidity make it nearly impossible for more than a handful of subscribers to get in on the action at a price remotely close to a level considered reasonable.
But every once in a while I come across a company that I cannot help but write about. Today, it is China Direct (NASDAQ:CDII), a tiny American company working in a huge international market.
The right end of a bad trade
The $39 million firm (I said it was tiny) is rather unique. While its magnesium business is currently its largest source of revenue, China Direct appears ready to jump into just about any business opportunity that comes its way.
If you have read my work with any regularity over the past couple of months, you know I believe China is going to play an incredibly large role in this nation’s finances for a long time. The value of the American dollar is in the hands of Beijing.
For many American companies, the notion is horrible news. The dollars they use to import Chinese goods are becoming increasingly worthless.
But for a company like China Direct that has a growing consulting business and has the liquidity required to jump on opportunities as they arise, a weak dollar could be a blessing, especially as China loosens its currency regulations.
Obviously, China Direct is a highly speculative company with an array of risks (ranging from political to exchange rates to liquidity). But if you are looking for a way to take advantage of what is quickly becoming one of the investing world’s most important themes – U.S. and China relations – this is a company worth looking into.
As I write, shares of the company are trading for $1.56, after dropping as low as $0.91 in the last few months. This time last year, however, shares were chasing the $10 level.
A surge back to half of that valuation would put serious profits into investor’s pockets.
If you are bullish on China and worried about America’s loose fiscal policy, check out China Direct. You will like what you see.
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